Public goods Vs Private Goods

 What are Public Goods?

Public good is a term in economics which refers to the good (commodity) that is available for use for everybody and one person’s usage of it does not diminish or exhaust its availability to others. It is considered non-excludable and non-rivalrous. Public goods are provided as a whole to the society by the government and the consumption of these goods by an individual doesn’t reduce its availability or doesn’t exclude others from consuming it. Therefore, public goods are non-rivalry and non-excludability.

Examples of public goods are education, infrastructure, lighthouses, flood control systems, knowledge, fresh air, national security, official statistics, etc. The public good is different from the common good in that common good, though non-excludable, tends to be semi-rivalrous in nature. Examples of common goods would be timber, coal, etc. Public goods are useful for the population as a whole. 

Free Rider Problem

The non-excludable property of the public goods gives rise to the free-rider problem as these goods can be bought by the people without paying for them. The free-rider problem is regarded as the burden on a shared resource. This situation arises when a person is using or overusing these goods without paying his/her fair share for it. The free-rider problem can occur in any community, large or small.

What is a Private Good?

Any product which must be purchased for consumption, and which prevents another individual from consuming it if consumed by one individual is known as a private good. Therefore, a good is considered to be a private good if there is a competition between individuals to obtain the good and if consuming the good prevents someone else from consuming it. 

Private goods have a lesser chance to experience the free-rider problem than the public goods as private goods are not readily available for free and a company produces private goods with a goal of making profits. 

Common resources are those products that are open to consumption by anyone with the means to do so. This means, however, that the chances of someone else using the resources is drastically reduced along with its availability also being less in number. Due to both of these factors common resources are subject to overuse as compared to any other resources. Examples of such resources are wood, farmlands, water, minerals, oil etc.

Club Goods

Club goods are resources which are available but can be easily prevented from being consumed or their consumption can be restricted. This prevents their depletion and overuse. Such goods are made deliberately scarce in order to increase their value and discourage overconsumption. Internet, roads, cinemas are examples of club goods.

Difference between Public Goods and Private Goods

The public goods and private goods vary from each other on the basis of excludability and rivalrousness. The major differences between Public Goods and Private Goods are mentioned in the table below:

Public GoodsPrivate Goods
It is non-rivalry as the consumption of one unit of these goods by one person does not decrease the available units for consumption by another person.It is rivalrous as the consumption of one unit of private goods by one person does decrease the available units for consumption by another person. 
It is non-excludable. A good is said to be non-excludable if it is impossible, or extremely costly, to prevent someone from benefiting from that particular good who has not paid for it. It is an excludable good as it prevents a person from enjoying the benefits of the good if they have not paid their share on that good. 

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